Highlight of Business Operations:

At September 30, 2010, we had approximately $303.3 million in cash, cash equivalents, and short-term investments and $240.0 million in indebtedness. We may from time to time purchase or retire convertible subordinated notes through cash purchase or exchanges for our other securities in open market or privately negotiated transactions, depending on, among other factors, our levels of available cash and the price at which such convertible notes are available for purchase. For instance, in the fourth quarter of 2008, we repurchased approximately $100.0 million in par value of our 3.25% convertible subordinated notes for an aggregate purchase price of $47.8 million. We will evaluate similar future transactions, if any, in light of then-existing market conditions. These transactions, individually or in the aggregate, may be material to our business.

For the three months and nine months ended September 30, 2010, the increase in License, collaboration and other revenue compared to the three months and nine months ended September 30, 2009 is primarily attributable to amortization of the $125.0 million upfront payment received from AstraZeneca for NKTR-118 and NKTR-119, contract research and other revenue from AstraZeneca, and the amortization of the $31.0 million license extension option payment received in December 2009. Under the AstraZeneca License, we recognized $25.3 million and $76.0 million, respectively, of the $125.0 million upfront payment and $1.4 million and $4.0 million, respectively, of contract research and other revenue for the three months and nine months ended September 30, 2010. We recognized $1.3 million and $3.8 million, respectively, of the license extension option payment for the three months and nine months ended September 30, 2010.

For the three months and nine months ended September 30, 2010 compared to the same periods in 2009, research and development expense increased by $1.3 million and $3.1 million, respectively, for our India operations after the completion of the India research facility, by $1.6 million and $4.9 million, respectively, in U.S. employee costs as a result of headcount additions and salary and benefit cost increases, and by $0.9 million and $2.6 million, respectively, in non-cash stock-based compensation expense. Additionally, research expense on pre-clinical programs increased by approximately $2.2 million and $3.0 million, respectively, for the three months and nine months ended September 30, 2010 compared to the three months and nine months ended September 30, 2009.

These increases are partially offset by lower expenses for the NKTR-118 and NKTR-119 programs as a result of our successful completion of Phase 2 clinical studies and the AstraZeneca License transaction in September 2009. NKTR-118 and NKTR-119 expenses totaled approximately $2.1 million and $8.6 million, respectively, for the three months and nine months ended September 30, 2009 compared to $1.1 million and $2.4 million, respectively, for the three months and nine months ended September 30, 2010. In addition, NKTR-102 program costs decreased by approximately $0.4 million for both the three months and nine months ended September 30, 2010 compared to the three months and nine months ended September 30, 2009.

We had cash, cash equivalents and short-term investments in marketable securities of $303.3 million and indebtedness of $240.0 million, including $215.0 million of 3.25% convertible subordinated notes due September 2012, $19.2 million in capital lease obligations, and $5.8 million in other liabilities as of September 30, 2010.

Cash flows used in operating activities for the nine months ended September 30, 2010, totaled $76.3 million, which includes $7.2 million for employee bonus payments related to services performed in 2009, $7.0 million for interest payments on our convertible subordinated notes, and $62.1 million of other net operating cash uses. Because of the nature and timing of certain cash receipts and payments, net cash utilization is not expected to be ratable over the four quarters of the year. We expect cash flows from operating activities will be positive as a result of the $50.0 million payment from Amgen expected in the fourth quarter in connection with the Sup

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